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Market Action – Dec. 7/2012
It shocks me at how willing shareholders of resource stocks, especially the smaller ones, are to sell their stock at extremely discounted prices. At the prices that many resource stocks are trading for, sellers really are giving their stocks away. The most important thing to remember when investing in resource companies is that you are investing in what is in the ground, and the stocks in the companies that own what is in their ground should be valued based on what they have, or their potential to increase what they have in the ground.
Not only are resource stocks trading at big discounts relative to what they have in the ground (in fact they are at lows not seen in over a decade, since the bear market of the 1990s was ending) and aren’t giving any credit for potential. When this is so widespread as it is now, you know that the market is trading on emotion, and whenever it is so extreme the market is ready to turn around.
Sure we are probably facing tax loss selling and soon will be seasonal weakness as investors go on holidays, so there could be more bargains in the next few weeks. But this is the time to be picking away at bargains, to take advantage of these cheap prices, and I will be getting more and more bullish on resource stocks, mainly because I’m in a very small group. And being in the contrary camp, especially when the prices are so out of touch with reality, is the one that proves to be the most accurate.
When the crowd is giving stocks away, it is time to take them up on their offer.
2012-12-07 21:42:46
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